Back in November 2013, we talked about the Designation of Accountant requirements. Well, effective June 1, 2014 there was an amendment to SEC Rule 17a-5(f)(2). As such, all Broker/Dealers must file a NEW Designation of Accountant form. FINRA has recently announced that there is a new electronic form, which will be available on the FINRA Gateway as of November 24, 2014. As in the past, this form is due by the 10th of the December (for fiscal year end December firms). All Broker/Dealers are required to file a new form, regardless of whether or not you have changed auditors, or if your audit engagement is continuous in nature. So, be sure to remind your FINOP to mark their calendars for the period 11/24 – 12/10, as they will have 16 days to file the new form. Again, a reminder that you should make sure your audit engagement letters have language in them stating that the agreement is of a continuing nature, providing for successive engagements. This will allow you to avoid having to file a new Designation of Accountant form each year, and does not preclude the annual renegotiation of fees and terms. Of course should you decide to change auditors, you will be required to file a Replacement of Accountant under Rule 17a-5(f)(3).
In accordance with the amended SEC Rule 17a-5(d),Broker/Dealer’s are now required to file annually either a compliance report or an exemption report. If your firm did not claim an exemption from Rule 15c3-3 (carrying brokers) for part or all of the year, you are required to file a compliance report. The compliance report must include statements as to whether the firm established and maintained internal control over compliance, if such controls were effective, if the firm was in compliance with SEC Rule 15c3-1 and paragraph (e) of Rule 15c3-3 for the most recent year. If there were material weaknesses, the firm must identify each weakness, and also disclose any non-compliance with 15c3-1 and paragraph (e) of 15c3-3. If your firm did claim exemption from Rule 15c3-3 for the most recent year, you are required to file a compliance report. The exemption report requires 3 straightforward statements in response to the following: 1) What exemption did the firm claim during the most recent year, 2) Did the firm meet the exemptive provisions, and were they without exception, 3) if there were any exceptions, what were they. While this amendment is new and has no precedent or real guidance, the requirements are clear (especially for those firms required to prepare and file an exemption report). Of course, auditors of Broker/Dealers are required, under PCAOB Attestation Standard No. 2 to review the compliance and exemption reports prepared by a Broker/Dealer (see http://pcaobus.org/Standards/Attestation/Pages/AT2.aspx).